Economy class air travel to become cheaper under GST regime from July 1

Economy class air travel will become cheaper with tax rate fixed at 5 per cent against the existing 6, under the upcoming GST regime from July 1.

Economy class air travel to become cheaper under GST regime from July 1 (Source: PTI)

With the upcoming GST regime the economy class air travel will become cheaper with tax rate fixed at 5 per cent against the existing 6 from July 1.

However, for those travelling business class, tickets will become dearer as the tax will go up from 9 per cent to 12 per cent.

Industry experts say that Friday's announcement is in line with the government's aim to make flying affordable for the masses.

"Government's decision to levy 5 per cent and 12 per cent tax for economy and business class is a very good decision which will continue to support affordable fare regime in India. The government was sensitive to the impact of higher GST slab on industry and the consumer is significantly positive", according to Sydney-based aviation think-tank CAPA Centre of Aviation.

The GST Council finalised four tax rates of 5, 12, 18 and 28 per cent to apply on services including telecom, insurance, hotels and restaurants.

CAPA also said that this is likely to further boost domestic aviation traffic, where India is at the third spot.India's domestic air passenger traffic stood at 100 million in 2016 and was behind only to the US (719 million) and China (436 million).

"Expect high growth rate in domestic traffic to continue in the near-term with further upside once the GST impact on the economy is visible in 1-2 years", it added.

The sentiment was echoed by travel portal Yatra.com.

"Overall, this seems like a good move for the sector and should help the growth momentum continue. Economy airfare will get marginally cheaper which should drive continued passenger growth in the air market, while business class will see a moderate increase", Sharat Dhall, COO, Yatra.com.

The 5 and 12 per cent tax rates come as a huge relief for the industry, which had expressed concern over the draft GST law released last year pegging tax rate at 17 per cent to 18 per cent. This, as per a PwC study, would have led to a 9 per cent to 12 per cent increase in the cost of air travel for passengers.